Congress Puts Up Warning Signs On Using Money From Military Cuts

October 11, 1991|By DAVID LIGHTMAN; Washington Bureau Chief

WASHINGTON — Peace dividends may look attractive, but lawmakers and budget experts Thursday warned Congress not to think cuts in military spending automatically should mean lots of new money for domestic programs.

Why not use the defense money to reduce the deficit, said Connecticut Rep. Christopher Shays, R-4th District. "What's so wrong with that?" he asked at a public hearing of a House Budget Committee task force.

"Nothing would be wrong with that," replied Alice M. Rivlin, senior fellow in economic studies at the Brookings Institution.

But getting fellow congressmen to go along is another matter.

Clearly, politicians see an opportunity to sweeten domestic programs. This week, House Speaker Thomas S. Foley, D-Wash., asked the committee to make a comprehensive review of the current budget.

As a result, Chairman Leon E. Panetta, D-Calif., plans to map out what the nation's budget needs may be over the next 10 years. He listed three goals: streamlining government, perhaps by reducing the number of Cabinet departments from 14 to as few as six; setting new goals for education, health care and economic growth: and reducing the deficit.

There was a lot of skepticism Thursday about whether all this was too ambitious.

One fear was that despite the breakup of the Soviet Union and President Bush's proposal to reduce nuclear arms, there is no telling what kind of international dangers lurk.

"The world situation could change suddenly -- and not in a favorable direction," said Robert D. Reischauer, director of the Congressional Budget Office.

A second problem is that mandatory spending, such as Social Security benefits, Medicare and Medicaid, threatens to swallow up any potential savings.

A third problem is that the 1990 budget agreement prohibits transferring money from defense to domestic programs, and the administration has expressed reluctance to alter the agreement.

The biggest concern, though, was the deficit. Budget office figures show the deficit growing from $279 billion in the fiscal

year that ended Sept. 30 to $362 billion in this fiscal year. Even with the spending cuts and tax increases enacted last year, the budget office predicts that the deficit will shrink only to $157 billion in fiscal 1994-95.

Experts and congressmen alike were concerned not only about the number, but about their colleagues' attitudes.

"What is most remarkable about the deterioriation in the deficit outlook is that it has occasioned no response in either the executive or the legislative branches," said Allen Schick, director of the University of Maryland Bureau of Governmental Research.

Big deficits hurt the economy, and the U.S. standard of living, in many ways. They are believed to help keep interest rates high, because the government competes with industry for money. The stiffer the competition, the higher rates are pushed.

In addition, more debt means more interest payments, thus soaking up tax dollars that would be spent for domestic programs.

Thus, no one disagreed when Rep. Mike Parker, D-Miss., declared, "If we continue on our current fiscal path, we're going to destroy the economy of this country." That is why Shays and others prefer using any military savings to reduce the deficit.

The talk in Washington budget circles, though, is that a way should be found to transfer some defense savings into domestic programs. That is now prohibited by the 1990 budget act. The White House budget director, Richard G. Darman, has indicated that something could be worked out, although the administration also has signaled it is not eager to reopen the agreement.